For over 40 years, Dollar Tree charged $1 for every item in the store. Whether it was a shirt, a toy, or a book, there was no price check needed because your tab would be exactly $1 per item. But recently, Dollar Tree raised that amount to $1.25 per item. Of all retailers, Dollar Tree is the most comparable to the mobile home park industry, as “trailer parks” have been offering ridiculously low prices for decades, and our customer base is very similar. So what’s the story on why Dollar Tree went to $1.25, how has that worked out, and what are the lessons learned for mobile home park lot rents?
Dollar Tree raised prices to actually HELP their customers
Here’s a fact that no woke media publication would ever accept: Dollar Tree raised prices to actually HELP their customers. Dollar Tree is limited in what it can offer in its stores because of the $1 price point – it’s pretty much just cheap toys, candy bars, wrapping paper, small packages of food, and discontinued items. But at a price of $1.25 per item, they found they could offer a substantially larger range of items to meet customers’ needs. They did this only after extensive market testing that found that customers were willing to pay more to get the items they needed. It’s not a case of the “evil business owner raising prices on the downtrodden” but instead “progressive business owner expanding their product range at the request of customers”. This is very similar to the mobile home park business, in which lot rents go up to allow for re-investment in the worn-out property to bring it back to life, as well as to provide competent, professional management. It’s a win/win concept, not a win/lose concept.
Dollar Tree raised their prices 25% and they are still incredibly cheap
I buy a huge amount of household staples at Dollar Tree in my small town in Missouri. For example, binder clips. Those little, handy black paper organizers cost $1 a box at Dollar Tree but $5 a box (for the exact same thing) at Office Depot. At $1.25, it’s still $3.75 cheaper than Office Depot. You can whine and complain that Dollar Tree raised their prices by 25%, but that’s not a truthful narrative. Dollar Tree raised their prices by 25% and remains the cheapest place on earth. That’s identical to the situation with mobile home park lot rents. With the average lot rent in the U.S. hovering around $300 per month, increasing the rent annually by $50 per month is a 17% increase. That sounds like a big percentage. But at $350 per month, it’s still $1,650 per month less than the average U.S. apartment.
Dollar Tree has seen higher sales despite higher prices
You would assume that Dollar Tree sales would plummet after a 25% price increase, right? Actually, the reverse is true – sales have actually climbed. That’s because customers do not focus just on the price, but on the overall value of what they get. And at $1.25, the value of Dollar Tree is still remarkably higher than the retail alternatives. Of course, we’ve been talking about this concept for years regarding mobile home parks, as we’ve found that most customers are willing to pay more to get a nice, clean, safe place to live that is well-maintained and offers a great location at a fraction of the competing housing options. Bureaucrats that have never managed a business are clueless about this fact, but customers are not.
Dollar Tree would still sell a ton if prices doubled or tripled
At what price point would shoppers stop buying from Dollar Tree? At $2? At 3? While we don’t know the answer, I would imagine that Dollar Tree could convert to Two Dollar Tree, and the stores would still be packed. Going back to the binder clip example, I would still buy that item at Dollar Tree if the price was $4 a package, as that’s still cheaper than Office Depot despite that being a 400% increase. The best mobile home park example of this is the parks in Denver, Colorado. Not that long ago, mobile home park lot rents in Denver were around $400 per month. Today they are around $850 per month. Not only are the mobile home parks full, but most even have waiting lists. Of course, the reason is that single-family homes are $535,800, and 3-bedroom apartments average $2,226 per month. Again, it all revolves around the perception of value.
Dollar Tree and mobile home parks have a lot in common. We serve the same customers – who are value shoppers – and we offer a product at a ridiculously low price. We also face the same challenge: bringing up prices to create a better experience for our clients.